Global Equity Portfolio Outlook, Positioning, and Attribution as of 12/31/2018

Outlook

  • Global economic growth should continue in 2019, despite headwinds from trade disputes, with positive momentum in the U.S. and mixed economic trends internationally.
  • Strong earnings growth in 2018 and the recent market pullback make U.S. valuations attractive amid moderate economic growth.
  • While European GDP growth should remain positive in 2019, major E.U. economies are seeing growth slow in the face of structural, cyclical, and political challenges.
  • Asia’s economic outlook is mixed, as signs of slow but improving economic trends in Japan contrast with economic deceleration in China, but Asian markets stand to benefit as trade tensions ease.

Portfolio Positioning

  • We favor U.S. sectors with both cyclical and secular tailwinds, like Information Technology and Communication Services, while avoiding more economically-cyclical and interest rate-sensitive sectors.
  • An underweight to Europe reflects our expectation that economic growth trends are unlikely to improve in the near-term.
  • We see better international opportunities in Asia, where modest growth expectations and low relative equity valuations have improved the region’s risk/reward profile.

Q4 Attribution

Positive Contributors:

Overweight
• U.S. Consumer Staples
• U.S. Health Care

Underweight
• U.S. Energy
• U.S. Industrials

Negative Contributors:

Underweight
• U.S. Utilities
• South & Central America

Attribution Analysis is relative to the MSCI ACWI (Net) Index benchmark and was current as of the date specified in this presentation. A complete attribution report is available upon request. The most recent complete presentation can be viewed here.
Any portfolio characteristics, including position sizes and sector allocations among others, are generally averages and are for illustrative purposes only and do not reflect the investments of an actual portfolio unless otherwise noted. The investment guidelines of an actual portfolio may permit or restrict investments that are materially different in size, nature and risk from those shown. The investment processes, research processes or risk processes shown herein are for informational purposes to demonstrate an overview of the process. Such processes may differ by product, client mandate or market conditions. Portfolios that are concentrated in a specific sector or industry may be subject to a higher degree of market risk than a portfolio whose investments are more diversified.
Holdings, Sector Weightings, and Portfolio Characteristics were current as of the date specified in this presentation. The listing of particular securities should not be considered a recommendation to purchase or sell these securities. While these securities were among WestEnd Advisors’ Global Equity holdings at the time this material was assembled, holdings will change over time. There can be no assurance that the securities remain in the portfolio or that other securities have not been purchased. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities presently in the portfolio. Individual clients’ portfolios may vary. Upon request, WestEnd Advisors will provide a list of all recommendations for the prior year.